Merger's tax plan options still open | PDF

Final formula far off: adviser

It's too early to say who will pay more or less in property taxes in a potential Evansville-Vanderburgh County government consolidation, says the chief financial adviser to citizen planners.

The effect on tax rates as the burden of paying for local government is redistributed would depend on numerous variables, said Tom Guevara, project manager for Indianapolis-based public accounting and consulting firm Crowe Horwath.

Guevara told the Evansville-Vanderburgh County Reorganization Committee last week that it is possible to create innumerable proposed tax scenarios and to make baseline projections using basic economic truisms, but those should not be relied upon.

"Although various property tax scenarios have been created, they're going to be subject to significant change for a lot of reasons, primarily based on the policy decisions of (a consolidated government's) Common Council," he said.

On Sept. 14, the reorganization committee will devote a public meeting to its finance and tax and planning/zoning subcommittees' draft proposals.

The heart of the finance and tax subcommittee's draft plan is its proposal for separate taxing districts.

These would include a general services district to encompass the entire county, in which property taxes would fund the costs of nonfee-based services provided to all residents.

An urban services district would mirror the city's boundaries. City taxpayers would pay for such services as sanitary sewers, water, street lighting and cleaning, garbage and refuse collection and fire protection.

Optional districts could include partial urban services districts in which various services could be extended beyond city boundaries but not to the entire county, and special services districts for designated geographic areas where residents would receive special services for a specific reason.

The town of Darmstadt, which is not participating in the proposed consolidation process, would have its own special services taxing district. Taxpayers there would continue to pay the town tax rate.

All taxpayers would continue to pay township tax rates because consolidation planners have no authority to reform township government. All separate authorities now taxed countywide would continue.

Questions remain

"(The proposed 11-member Common Council) will have a lot of leeway with respect to how revenues may be allocated and what services may be put into what (taxing) districts," Guevara told the reorganization committee.

"... We also don't know what's going to happen with respect to the future with regard to economic conditions that may affect things such as property tax levies, income tax revenues and other sorts of revenues that may be available to provide services in the reorganized city."

Crowe Horwath has created a half-dozen scenarios for the provision of government services and distribution of expenses, using such variables as net and gross assessed value.

One scenario removes all expenses associated with the current Evansville Police Department from the general services district and allocates them to the urban services district. Another also allocates police services to the urban services district but allocates expenses of the current Vanderburgh County Sheriff's Office to a special services district that includes only taxpayers outside the city. Expenses associated with corrections would remain in the general services district on the grounds that all taxpayers benefit from them.

"There's numerous other possible scenarios because of the fact that it's left up to several discretionary policy decisions," Guevara said. "You can come up with an almost incalculable number of scenarios."

Other general deductions have been made, always with the caveat that property tax levies and rates would be determined by budgets adopted by elected Common Council members.

Crowe Horwath has reported that adding current city expenses and tax levy to the proposed general services district would push tax rates for taxpayers outside the city upward. Such spreading of the burden over a larger assessed value base also would result in a net decrease in city residents' overall tax rate.

"It will be up to (council members) as policymakers to find the efficiencies and allocate the services and the cost of those services in the way that they think best serves all of the residents," Guevara said. "That just can't be emphasized enough."

Mayoral aide

To go with the powerful Common Council, consolidation planners envision a financial adviser to the mayor of a consolidated government. The mayoral appointee, who would have the title of director of budget and finance, would be responsible for preparing the annual budget.

"That officer will take the budget to the Common Council, where it will be open to public input, input by departmental heads and will be modified as (council members) see fit and forwarded on to the mayor for his signature or a veto to go back for more work," said Ed Hafer Jr., chairman of the finance and tax subcommittee.

The reorganization committee's governance subcommittee report says elected officials would first submit their proposed budgets to the budget and finance director, who could trim them before submitting a complete proposed budget to the council.

But the governance subcommittee takes pains to assure the budget and finance director's power would be checked.

That individual or the mayor would have to notify elected officials, in writing, of any changes to their proposed budgets before the budgets were submitted to the Common Council. Elected officials would have the ability to go before the council to argue for restoration of cuts.

Chuck Whobrey, a member of the governance subcommittee, pointed to a provision of the group's report that says the Common Council could add more money to a budget line item than the budget and finance director had proposed, as long as the 11-member governing body could muster eight votes.

"That budgeting process of being able to add to a line item with a supermajority is important so all of the other elected officials — auditor, treasurer, surveyor — are not totally at the mercy of the mayor's appointee, the director of budget and finance," Whobrey said. "There has to be a release valve."

The mayor would not have line-item veto power in the budget, under the subcommittee's proposal.

New ideas

The finance and tax subcommittee also recommends any tax increases or decreases that occur as a result of consolidation be phased in over three years and that utility rates and fees be "equalized throughout the county."

About 11,000 residents outside the city receive Evansville sewer services, and about 40,000 residents in the city are sewer customers.

The higher rates were passed in June 2002, with City Council members citing the greater distances that county-only residents' sewage had to be pumped.

In June, at-large County Councilman Joe Kiefer told reorganization committee Chairwoman Rebecca Kasha that consolidation might find more favor with county-only residents if they could see their rates brought even with the rates paid by city residents.

"I think it would be an olive branch to county residents outside the city limits who currently pay a higher rate," said Kiefer, who helped kick off the 2005 consolidation drive by pushing for it two years earlier as a member of the City Council.

The finance and tax subcommittee also recommends street lighting become part of a consolidated government's utility department, billed as a fee for services outside the urban service district. Inside the urban district, the operation of street lights would be paid for out of county-option income tax proceeds, as the city now does.

"What this really does is say that if you're outside the urban district and you want street lighting, it's the same as if you want sewer and water," Hafer said. "You will go to the utility board, they will determine a rate for that, that's going to be different, and you'll get a bill for it rather than being taxed."